Metropolitan Labour Markets and Urban Productivity

By Anjum Altaf

Urban productivity is determined by a number of variables, including population size and urban sprawl. With effective infrastructure investment, cities can enable more workers to access available jobs, creating integrated labour markets and increasing urban productivity.

From an economic perspective, the concept of a metropolitan area is related to the existence of an integrated labour market. If the labour market extends beyond the municipal boundaries of a city, it becomes part of a metropolitan labour market.

Metropolitan labour markets are importantbecause output per worker increases with the size of the labour market; increased population density leads to a higher number of economic interactions per unit of area.

However, the population size of a city is only one determinant of its productivity. The other critical determinant isurban sprawl, which takes into account how far jobs and residences are located, and the speed of transport, which influences access to jobs. The speed itself is a productof the transport system and infrastructure investment management.In this framework, one key objectiveforan urban area is to increase the size of the labour market, which becomesa useful indicator to measurepolicy effectiveness for increasing urban productivity.

One measure of the ‘effective size’ of a labour market is the average number of jobs available to city residents within a travel time of 60 minutes,using amode of transportation available to the majority

Research suggests that the agglomeration effects on labour productivity die out almost completely beyond the one-hour commute boundary.Studies show that 100% of the total jobs in cities like Los Angeles, Chicago, District of Columbia and Atlanta are accessible to every worker within a one-hour commute, i.e. these cities have fully integrated labour markets. This high access, despite the well-known sprawl of these cities, is due to the combination of high-speed public transit (DC, Chicago) or reliance on the personal automobile for commuting (LA, Atlanta).

One would expect the effective size of the labour market to be smaller in South Asian countries, where not all workerswill be able to access every job easily, becausehigh-speed public transit is limited and most households do not own motorized transport. This matters from a policy perspective since without an integrated labour market a city does not benefit from its large population size but only bears all thewell-known disadvantages.In effect, a city with fragmented labour markets is really a set of smaller cities juxtaposed to each other. To accessa higher paying job in a non-overlapping labour market,a worker would need to relocate.

The case of Lahore

This hypothesis was tested in the 40th largest city in the world,Lahore, which has a metropolitanpopulation of 9 million. We limited ourselves to one aspect of the size of the labour market – access to the presently existing number of jobs–leaving aside the equally important employment creation aspect, which aims to increase the total number of available jobs.

Formal estimation of the average number of jobs that can be reached by the typical worker in one hour requires sophisticated modelling and a rich datasource. Withsparse data and budget constraints, a proxy measure can be used – the population that can access a particular node in the city within a one-hour commute as a proportion of the total city population.

Taking Lahore city centre as the relevant node we first measured access to it from three small cities within a 30 mile radius of Lahore. We found none within a one-hour commuting distance to Lahore using public transport. Hence, Lahore does not have a metropolitan labour market.We then investigated the labour market within the municipal boundary of Lahore. Using the main industrial and service sector hubs and residential housing concentrations as relevant nodes, we confirmed that the Lahore labour market ishighly fragmented.

Potential solutions to the fragmented labour markets

Increasing the economic productivity of Lahore requires the integration of its fragmented labour markets. A time-bound target would require strategic investments in high-speed public transit and improved traffic management along particularly congested corridors. The unambiguously measurable indicatorsof effective labour market size would allow progress to be easily monitored over time.

Such an intervention would simultaneously augment the metropolitan labour market, since our study revealed that the commuting time from the neighbouring small cities to the municipal boundary of Lahore was well within 60 minutes. The main delays occurred in the segments connecting the municipal boundary to the city centre.

Our study showed that the prevalent policy of road investmentsdoes not support the labour market integration; rather it enables the affluent to move out to less dense suburbs and commute back on new roads using private automobiles further congesting city centres. The mobility of the lower-income majority within the dense quadrants of the city continues to worsen. The perverse outcome is that while the area of some one-hour commute circles increases over time their population densities drop significantly.

A Typical Traffic Jam in Lahore

Such an infrastructure investment strategy caters to the convenience of the affluent and does virtually nothing for economic growth. It promotesarapid increasein the number of private vehicles and prevents the city from staying ahead of the demand for road space. A strategy that is focused on urban economic growth needs to reorient itself to infrastructure and traffic management investments that positively impact the speed of movement in the dense areas themselves, rather than in facilitating access to the dense areas.

A unique approach for South Asian cities

While the focus should be on high-speed public transit in dense areas of cities, we do not recommend emulating developed cities by extending the network outside municipal boundaries (e.g. as in Washington, D.C., where outlying cities within 30 miles are a part of the metro-rail system). This is because the wage differential for the majority of workers between the outlying locations and the primary city is not sufficient to cover the incremental transport costs.

This conclusion raises the much bigger question of whether South Asian cities at their present levels of economic development and per-capita incomes should aspire to be compact or connected. This issue has not received adequate attention and real estate imperatives have caused most citiesto spread out (sprawl) without adequate connectivity. They have become automobile-centric cities,even though less than 10% of theirhouseholds own automobiles and compensating investment in public transporthas been insufficient.

While it is too late for cities of the size of Lahore to undo their sprawl, the question should be taken seriously for smaller cities that are urbanizing rapidly, but still have time for intelligent spatial design interventions.

A Scene on the New BRT Line in Lahore

While recent investments in Bus Rapid Transit are ostensibly moves in the right direction (the completed BRT line in Lahore increased the size of the contiguous labour market by about a third), the orientationmust be reassessed in the context of the compactness versus connectedness debate, necessitated by ability to pay realities. This would force much needed attention to issues of land use efficiency and how to enhance it using planning tools such as Floor Area Ratios, Transferable Development Rights, and Urban Growth Boundaries. These tools are currently not being leveraged at all in the urban planning of most cities in South Asia.

This article was published in City Voices,Vol 7, No 1, 2016 and is reproduced here with permission of the author. The article was written when the author was Vice-President and Provost at Habib University. Earlier he was Professor of Economics and Dean, School of Humanities, Social Sciences and Law at the Lahore University of Management Sciences.

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